diff --git a/subsys/bluetooth/host/hci_core.c b/subsys/bluetooth/host/hci_core.c
index 3f0a32dd094..9a87a47f6db 100644
--- a/subsys/bluetooth/host/hci_core.c
+++ b/subsys/bluetooth/host/hci_core.c
@@ -1159,6 +1159,7 @@ static void conn_auto_initiate(struct bt_conn *conn)
 
 static void le_conn_complete_cancel(uint8_t err)
 {
+	int ret;
 	struct bt_conn *conn;
 
 	/* Handle create connection cancel.
@@ -1172,27 +1173,30 @@ static void le_conn_complete_cancel(uint8_t err)
 		return;
 	}
 
-	conn->err = err;
-
-	/* Handle cancellation of outgoing connection attempt. */
-	if (!IS_ENABLED(CONFIG_BT_FILTER_ACCEPT_LIST)) {
-		/* We notify before checking autoconnect flag
-		 * as application may choose to change it from
-		 * callback.
-		 */
-		bt_conn_set_state(conn, BT_CONN_DISCONNECTED);
-		/* Check if device is marked for autoconnect. */
-		if (atomic_test_bit(conn->flags, BT_CONN_AUTO_CONNECT)) {
+	if (atomic_test_bit(conn->flags, BT_CONN_AUTO_CONNECT)) {
+		if (!IS_ENABLED(CONFIG_BT_FILTER_ACCEPT_LIST)) {
 			/* Restart passive scanner for device */
 			bt_conn_set_state(conn, BT_CONN_SCAN_BEFORE_INITIATING);
+		} else {
+			/* Restart FAL initiator after RPA timeout. */
+			ret = bt_le_create_conn(conn);
+			if (ret) {
+				LOG_ERR("Failed to restart initiator");
+			}
 		}
 	} else {
-		if (atomic_test_bit(conn->flags, BT_CONN_AUTO_CONNECT)) {
-			/* Restart FAL initiator after RPA timeout. */
-			bt_le_create_conn(conn);
-		} else {
-			/* Create connection canceled by timeout */
+		int busy_status = k_work_delayable_busy_get(&conn->deferred_work);
+
+		if (!(busy_status & (K_WORK_QUEUED | K_WORK_DELAYED))) {
+			/* Connection initiation timeout triggered. */
+			conn->err = err;
 			bt_conn_set_state(conn, BT_CONN_DISCONNECTED);
+		} else {
+			/* Restart initiator after RPA timeout. */
+			ret = bt_le_create_conn(conn);
+			if (ret) {
+				LOG_ERR("Failed to restart initiator");
+			}
 		}
 	}
 
diff --git a/subsys/bluetooth/host/id.c b/subsys/bluetooth/host/id.c
index d6f23f2db64..38263e1cb2a 100644
--- a/subsys/bluetooth/host/id.c
+++ b/subsys/bluetooth/host/id.c
@@ -606,7 +606,6 @@ static void le_update_private_addr(void)
 	}
 #endif
 	if (IS_ENABLED(CONFIG_BT_CENTRAL) &&
-	    IS_ENABLED(CONFIG_BT_FILTER_ACCEPT_LIST) &&
 	    atomic_test_bit(bt_dev.flags, BT_DEV_INITIATING)) {
 		/* Canceled initiating procedure will be restarted by
 		 * connection complete event.
diff --git a/tests/bsim/bluetooth/host/privacy/central/CMakeLists.txt b/tests/bsim/bluetooth/host/privacy/central/CMakeLists.txt
index 75e1deb8f82..7ec3436c8f8 100644
--- a/tests/bsim/bluetooth/host/privacy/central/CMakeLists.txt
+++ b/tests/bsim/bluetooth/host/privacy/central/CMakeLists.txt
@@ -5,6 +5,12 @@ cmake_minimum_required(VERSION 3.20.0)
 find_package(Zephyr REQUIRED HINTS $ENV{ZEPHYR_BASE})
 project(bsim_test_rpa_central)
 
+add_subdirectory(${ZEPHYR_BASE}/tests/bluetooth/common/testlib testlib)
+target_link_libraries(app PRIVATE testlib)
+
+add_subdirectory(${ZEPHYR_BASE}/tests/bsim/babblekit babblekit)
+target_link_libraries(app PRIVATE babblekit)
+
 target_sources(app PRIVATE
 	src/bs_bt_utils.c
 	src/tester.c
diff --git a/tests/bsim/bluetooth/host/privacy/central/prj.conf b/tests/bsim/bluetooth/host/privacy/central/prj.conf
index e3fa9de43d7..a4eea958b17 100644
--- a/tests/bsim/bluetooth/host/privacy/central/prj.conf
+++ b/tests/bsim/bluetooth/host/privacy/central/prj.conf
@@ -11,3 +11,8 @@ CONFIG_BT_RPA_TIMEOUT=10
 CONFIG_BT_CTLR_ADV_SET=2
 CONFIG_BT_CTLR_SCAN_REQ_NOTIFY=y
 CONFIG_BT_SCAN_WITH_IDENTITY=y
+
+# Enable the possibility to set the RPA such that the RPA
+# refreshes before the connection attempt has completed
+CONFIG_BT_RPA_TIMEOUT_DYNAMIC=y
+CONFIG_BT_CREATE_CONN_TIMEOUT=10
diff --git a/tests/bsim/bluetooth/host/privacy/central/src/dut.c b/tests/bsim/bluetooth/host/privacy/central/src/dut.c
index e80b9bc8f93..5a49b6e5097 100644
--- a/tests/bsim/bluetooth/host/privacy/central/src/dut.c
+++ b/tests/bsim/bluetooth/host/privacy/central/src/dut.c
@@ -12,6 +12,10 @@
 #include <zephyr/bluetooth/conn.h>
 #include <zephyr/bluetooth/bluetooth.h>
 
+#include <babblekit/testcase.h>
+#include <testlib/conn.h>
+#include <testlib/scan.h>
+
 void start_scanning(void)
 {
 	int err;
@@ -46,3 +50,69 @@ void dut_procedure(void)
 
 	PASS("PASS\n");
 }
+
+void dut_procedure_connect_short_rpa_timeout(void)
+{
+	backchannel_init(1);
+
+	const uint16_t rpa_timeout_s = 1;
+
+	int err;
+	bt_addr_le_t peer = {};
+	struct bt_conn *conn = NULL;
+
+	/* Enable bluetooth */
+	err = bt_enable(NULL);
+	TEST_ASSERT(!err, "Failed to enable bluetooth (err %d)");
+
+	/* Central to use a short RPA timeout */
+	err = bt_le_set_rpa_timeout(rpa_timeout_s);
+	TEST_ASSERT(!err, "Failed to set RPA timeout (err %d)", err);
+
+	err = bt_testlib_scan_find_name(&peer, CONFIG_BT_DEVICE_NAME);
+	TEST_ASSERT(!err, "Failed to start scan (err %d)", err);
+
+	/* Indicate to the peer device that we have found the advertiser. */
+	backchannel_sync_send();
+
+	/* Create a connection using that address */
+	err = bt_testlib_connect(&peer, &conn);
+	TEST_ASSERT(!err, "Failed to initiate connection (err %d)", err);
+
+	PASS("PASS\n");
+}
+
+void dut_procedure_connect_timeout(void)
+{
+	const uint16_t rpa_timeout_s = 1;
+
+	int err;
+	bt_addr_le_t peer = {.type = BT_ADDR_LE_RANDOM, .a = {.val = {1, 2, 3, 4, 5, 6}}};
+	struct bt_conn *conn = NULL;
+
+	/* Enable bluetooth */
+	err = bt_enable(NULL);
+	TEST_ASSERT(!err, "Failed to enable bluetooth (err %d)", err);
+
+	/* Central to use a short RPA timeout */
+	err = bt_le_set_rpa_timeout(rpa_timeout_s);
+	TEST_ASSERT(!err, "Failed to set RPA timeout (err %d)", err);
+
+	int64_t old_time = k_uptime_get();
+
+	/* Create a connection using that address */
+	err = bt_testlib_connect(&peer, &conn);
+	TEST_ASSERT(err == BT_HCI_ERR_UNKNOWN_CONN_ID,
+		    "Expected connection establishment to time out (err %d)", err);
+
+	int64_t new_time = k_uptime_get();
+	int64_t time_diff_ms = new_time - old_time;
+	int64_t expected_conn_timeout_ms = CONFIG_BT_CREATE_CONN_TIMEOUT * 1000;
+	int64_t diff_to_expected_ms = abs(time_diff_ms - expected_conn_timeout_ms);
+
+	printk("Connection creation timed out after %d ms\n", time_diff_ms);
+	TEST_ASSERT(diff_to_expected_ms < 0.1 * expected_conn_timeout_ms,
+		    "Connection timeout not within 10 \%% of expected timeout");
+
+	PASS("PASS\n");
+}
diff --git a/tests/bsim/bluetooth/host/privacy/central/src/main.c b/tests/bsim/bluetooth/host/privacy/central/src/main.c
index cb5f12f9d0f..a2f48b09ec8 100644
--- a/tests/bsim/bluetooth/host/privacy/central/src/main.c
+++ b/tests/bsim/bluetooth/host/privacy/central/src/main.c
@@ -8,21 +8,51 @@
 #include "bstests.h"
 
 void tester_procedure(void);
+void tester_procedure_periph_delayed_start_of_conn_adv(void);
 void dut_procedure(void);
+void dut_procedure_connect_short_rpa_timeout(void);
+void dut_procedure_connect_timeout(void);
 
 static const struct bst_test_instance test_to_add[] = {
 	{
 		.test_id = "central",
+		.test_descr = "Central performs active scanning using RPA",
 		.test_post_init_f = test_init,
 		.test_tick_f = test_tick,
 		.test_main_f = dut_procedure,
 	},
+	{
+		.test_id = "central_connect_short_rpa_timeout",
+		.test_descr = "Central connects to a peripheral using a short RPA timeout",
+		.test_post_init_f = test_init,
+		.test_tick_f = test_tick,
+		.test_main_f = dut_procedure_connect_short_rpa_timeout,
+	},
+	{
+		.test_id = "central_connect_fails_with_short_rpa_timeout",
+		.test_descr = "Central connects to a peripheral using a short RPA timeout"
+			      " but expects connection establishment to time out.",
+		.test_post_init_f = test_init,
+		.test_tick_f = test_tick,
+		.test_main_f = dut_procedure_connect_timeout,
+	},
 	{
 		.test_id = "peripheral",
+		.test_descr = "Performs scannable advertising, validates that the scanner"
+			      " RPA address refreshes",
 		.test_post_init_f = test_init,
 		.test_tick_f = test_tick,
 		.test_main_f = tester_procedure,
 	},
+	{
+		.test_id = "periph_delayed_start_of_conn_adv",
+		.test_descr = "Performs connectable advertising. "
+			      "The advertiser is stopped for 10 seconds when instructed by the DUT"
+			      " to allow it to run the initiator for longer than its RPA timeout.",
+		.test_post_init_f = test_init,
+		.test_tick_f = test_tick,
+		.test_main_f = tester_procedure_periph_delayed_start_of_conn_adv,
+	},
 	BSTEST_END_MARKER,
 };
 
diff --git a/tests/bsim/bluetooth/host/privacy/central/src/tester.c b/tests/bsim/bluetooth/host/privacy/central/src/tester.c
index 1bbb8fc8de6..b1c6e9fd1bc 100644
--- a/tests/bsim/bluetooth/host/privacy/central/src/tester.c
+++ b/tests/bsim/bluetooth/host/privacy/central/src/tester.c
@@ -14,7 +14,10 @@
 #include <zephyr/bluetooth/conn.h>
 #include <zephyr/toolchain.h>
 
+#include <babblekit/testcase.h>
+
 DEFINE_FLAG(flag_new_address);
+DEFINE_FLAG(flag_connected);
 
 void scanned_cb(struct bt_le_ext_adv *adv, struct bt_le_ext_adv_scanned_info *info)
 {
@@ -64,8 +67,14 @@ void scanned_cb(struct bt_le_ext_adv *adv, struct bt_le_ext_adv_scanned_info *in
 	old_addr = new_addr;
 }
 
+static void connected_cb(struct bt_le_ext_adv *adv, struct bt_le_ext_adv_connected_info *info)
+{
+	SET_FLAG(flag_connected);
+}
+
 static struct bt_le_ext_adv_cb adv_callbacks = {
 	.scanned = scanned_cb,
+	.connected = connected_cb
 };
 
 void start_advertising(void)
@@ -125,3 +134,54 @@ void tester_procedure(void)
 
 	PASS("PASS\n");
 }
+
+void tester_procedure_periph_delayed_start_of_conn_adv(void)
+{
+	backchannel_init(0);
+
+	int err;
+	struct bt_le_adv_param params =
+		BT_LE_ADV_PARAM_INIT(BT_LE_ADV_OPT_CONNECTABLE | BT_LE_ADV_OPT_USE_IDENTITY,
+				     BT_GAP_ADV_FAST_INT_MIN_2,
+				     BT_GAP_ADV_FAST_INT_MAX_2, NULL);
+	struct bt_data ad;
+	struct bt_le_ext_adv *adv;
+
+	/* Enable bluetooth */
+	err = bt_enable(NULL);
+	TEST_ASSERT(!err, "Failed to enable bluetooth (err %d)");
+
+	/* Advertiser to use a long RPA timeout */
+	err = bt_le_set_rpa_timeout(100);
+	TEST_ASSERT(!err, "Failed to set RPA timeout (err %d)", err);
+
+	err = bt_le_ext_adv_create(&params, &adv_callbacks, &adv);
+	TEST_ASSERT(!err, "Failed to create advertising set (err %d)", err);
+
+	ad.type = BT_DATA_NAME_COMPLETE;
+	ad.data_len = strlen(CONFIG_BT_DEVICE_NAME);
+	ad.data = (const uint8_t *)CONFIG_BT_DEVICE_NAME;
+
+	err = bt_le_ext_adv_set_data(adv, &ad, 1, NULL, 0);
+	TEST_ASSERT(!err, "Failed to set advertising data (err %d)", err);
+
+	err = bt_le_ext_adv_start(adv, BT_LE_EXT_ADV_START_DEFAULT);
+	TEST_ASSERT(!err, "Failed to start advertiser (err %d)", err);
+
+	backchannel_sync_wait();
+
+	err = bt_le_ext_adv_stop(adv);
+	TEST_ASSERT(!err, "Failed to stop advertiser (err %d)", err);
+
+	/* Wait a few RPA cycles before restaring the advertiser to force RPA timeout
+	 * on the DUT.
+	 */
+	k_sleep(K_SECONDS(7));
+
+	err = bt_le_ext_adv_start(adv, BT_LE_EXT_ADV_START_DEFAULT);
+	TEST_ASSERT(!err, "Failed to restart advertiser (err %d)", err);
+
+	WAIT_FOR_FLAG(flag_connected);
+
+	PASS("PASS\n");
+}
diff --git a/tests/bsim/bluetooth/host/privacy/central/test_scripts/run_test_short_conn_timeout.sh b/tests/bsim/bluetooth/host/privacy/central/test_scripts/run_test_short_conn_timeout.sh
new file mode 100755
index 00000000000..5e15e785178
--- /dev/null
+++ b/tests/bsim/bluetooth/host/privacy/central/test_scripts/run_test_short_conn_timeout.sh
@@ -0,0 +1,26 @@
+#!/usr/bin/env bash
+# Copyright 2024 Nordic Semiconductor ASA
+# SPDX-License-Identifier: Apache-2.0
+set -eu
+
+source ${ZEPHYR_BASE}/tests/bsim/sh_common.source
+
+EXECUTE_TIMEOUT=100
+verbosity_level=2
+
+# Test that connection establishment times out when RPA
+# timeout is shorter than the connection establishment timeout
+simulation_id="test_central_connect_fails_with_short_rpa_timeout"
+
+central_exe="${BSIM_OUT_PATH}/bin/bs_${BOARD_TS}_$(guess_test_long_name)_prj_conf"
+
+cd ${BSIM_OUT_PATH}/bin
+
+Execute "$central_exe" \
+    -v=${verbosity_level} -s=${simulation_id} -d=0 \
+    -testid=central_connect_fails_with_short_rpa_timeout -RealEncryption=1
+
+Execute ./bs_2G4_phy_v1 -v=${verbosity_level} -s=${simulation_id} \
+    -D=1 -sim_length=60e6 $@
+
+wait_for_background_jobs
diff --git a/tests/bsim/bluetooth/host/privacy/central/test_scripts/run_test_short_rpa_timeout.sh b/tests/bsim/bluetooth/host/privacy/central/test_scripts/run_test_short_rpa_timeout.sh
new file mode 100755
index 00000000000..0ed76b2f86a
--- /dev/null
+++ b/tests/bsim/bluetooth/host/privacy/central/test_scripts/run_test_short_rpa_timeout.sh
@@ -0,0 +1,31 @@
+#!/usr/bin/env bash
+# Copyright 2024 Nordic Semiconductor ASA
+# SPDX-License-Identifier: Apache-2.0
+set -eu
+
+source ${ZEPHYR_BASE}/tests/bsim/sh_common.source
+
+EXECUTE_TIMEOUT=100
+verbosity_level=2
+
+# Test connection establishment when the RPA times out before
+# we expect the connection to be established
+simulation_id="test_central_connect_short_rpa_timeout"
+
+central_exe="${BSIM_OUT_PATH}/bin/bs_${BOARD_TS}_$(guess_test_long_name)_prj_conf"
+peripheral_exe="${central_exe}"
+
+cd ${BSIM_OUT_PATH}/bin
+
+Execute "$central_exe" \
+    -v=${verbosity_level} -s=${simulation_id} -d=0 \
+    -testid=central_connect_short_rpa_timeout -RealEncryption=1
+
+Execute "$peripheral_exe" \
+    -v=${verbosity_level} -s=${simulation_id} -d=1 \
+    -testid=periph_delayed_start_of_conn_adv -RealEncryption=1
+
+Execute ./bs_2G4_phy_v1 -v=${verbosity_level} -s=${simulation_id} \
+    -D=2 -sim_length=60e6 $@
+
+wait_for_background_jobs